The FN Fintech Files — October 10

Welcome to the third edition of The Fintech Files. I'm Yolanda Bobeldijk, FN's fintech correspondent, keeping you up-to-date with the latest developments in financial technology and innovation.

Asset managers open up to the cloud They might be a little late to the party, but asset managers are the latest financial institutions to look into cloud technology. The various regulatory technology firms they are working with have introduced them to the idea of saving money by storing data differently and a number of fintech firms tell me that this is causing some to consider using Amazon Web Services and Microsoft Azure across their organisations for the first time.

Why is this happening? It is well known that banks struggle with their legacy IT systems, but asset managers are also maintaining a myriad of IT systems that have been spawned from years of bolt-ons and upgrades. Fintech founders say that they are just as worried about ‘spaghetti systems’ as the banks, and these annual costs are ultimately being met by their investors. This has been the case for a while, but what has changed is that regtech operations working with asset managers have shown them that a one-off investment can lead to significant savings further down the line and that these systems are safer than they think. One told me that as AWS has grown in recent years, asset managers are feeling more confident about cloud security than before.

As such, asset managers have been creating new roles including ‘head of cloud strategy’ in recent months after having what one executive described as a “light bulb” moment.

Fintech Files’ View This could take years, even decades, to take effect across the whole industry, but there is no better time to make an important change than right now. Asset management profit margins are being squeezed and they need to find ways of becoming more efficient. One of the benefits of the cloud is that users don’t pay a static price for data centres, but only pay for data consumption. One fintech founder told me that paying for something that has to meet your capacity can be very expensive and ineffective. “You might only meet [that] once a week or once a month but you have to pay for that 24/7, 365 [days a year]. It doesn’t really make sense.”

What’s more, many experts warn that having a raft of systems can lead to more potential points of failure, cyber security breaches and data losses. It stands to reason then that fund managers would look to alternatives, especially when there is such an obvious one available.

Are you an asset manager contemplating cloud use? I am keen to hear more about this transition within the industry, so please do drop me a line.

----------------------------------------------------- Want to meet for a coffee to talk all things fintech? Have a good story to share? Shoot me an email yolanda.bobeldijk@wsj.com. I am also on Twitter and LinkedIn -----------------------------------------------------

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Crypto boom exposes money laundering market BlackRock CEO Larry Fink has told Bloomberg that cryptocurrencies illustrate how much money laundering is being done in the world, but added that he’s a “big believer” in the potential of cryptocurrencies.

Bank of England takes up more fintech projects The Bank of England has announced four new fintech initiatives including projects with regtech Digital Reasoning and AI startup Mindbridge Analytics.

Beware of bitcoin bubble If there’s a price crash in the cryptocurrency market, it could hit more than just the tech sector, according to The Wall Street Journal.

EU raids Polish and Dutch banking groups over fintech access The European Commission has raided the offices of European banking associations in Poland and the Netherlands as part of an antitrust crackdown on banks that prevent fintech rivals from gaining legitimate access to customer information, according to the FT.

Capital markets firms daunted by resource requirements for cloud, AI and DLT Financial institutions are concerned that they don’t have sufficient resources and expertise to realise the full potential of new technologies, according to FinExtra.

After bitcoin crackdown, cryptocurrencies go clandestine in China Seminars on digital-currency investing that once drew hundreds now take place in smaller, more secretive settings after authorities cracked down on ICOs, according to The Wall Street Journal.

Oracle hits back at AWS Software company Oracle is bolstering its cloud offering as it’s increasingly competing for clients with cloud providers such as AWS and Microsoft Azure, according to CRN.